Rockwell v. Daniels

4 Wis. 432

Opinion

By the Court,

Smith, J.

It will be admitted by all, that Young, the plaintiff in interest, took the assignment of the subscription-paper, subject to all the equities between the original parties at the time of the assignment. It was a mere chose in action, not assignable at law, and could not be sued upon in the name of the-assignee. The subscription was for one hundred dollars, payable in quarterly installments, the last of which became due in one year. The contract of Hemmenway and Daniels required them-to complete the mill within one year ,* to wit, by the 25th day of J'ul'y, 1852. On the 24th day of July, 1852, the committee appointed by the subscribers, in pursuance of authority vested in-them (as is claimed), extended the time for the completion of the contract for the term of six months. We make no note here of the exceptions taken to the form or validity of such extension, but for the present assume it to have been regular. Then the plaintiffs were bound to complete the mill by the 25th of January, 1853', and the whole subscription of the complainant became due and payable on the 25th of July, 1852. But before the subscription became due, and before the mill was required to be com. pleted, the plaintiffs Daniels and Hemmenway, assigned the subscription to Young, some time in November, 1851, and notice of such assignment was given to the subscribers. At the time when the last installment became due, there remained unpaid on the subscription of Rockwell forty dollars, to recover which this suit was brought.

It seems quite clear, that Young could obtain no further rights by virtue of the contract and the assignment thereof, than such as had accrued, or would accrue, by virtue thereof to Daniels and-Hemmen way. It is only necessary to know their rights from time to time in order to enable us to understand what are the rights of Young, for whose use this suit is brought..

But it is contended that as the whole of the subscription became due the 25th day of July, 1852, and as the time for completing the mill was extended, and as such extension did not work a postponement of the payment of the subscription, there was then a perfect right of action thereon in Young or Daniels and Hemmenway for his use, and no subsequent failure or forfeiture, or breach on their part, could affect such right. This proposition may be very true, and yet the error of the court below in excluding the evidence on which the claim for recoupment was based, is not cured or relieved. The assignment of the subscription paper .did not make it better. Whatever cause of action there was, or arose upon it, was in Daniels and Hemmen-way, either for their own use, or that of another in their name. On the 27th day of July, 1852, Daniels and Hemmenway had a cause of action (assuming for present purposes that the subscription was good and valid) for the balance due upon the subscription. Had they then brought suit, they would have recovered the whole balance due, if there were no other objection than the non-fulfillment of their contract. But if they had waited until the time for the fulfillment of their contract had elapsed, and they had failed at length to perform, does any one doubt that the defendant could recoup to the amount of the plaintiffs’ claim, provided the damages for their breach of contract should equal that amount? Had the plaintiffs sued upon the subscription immediately after it became due, no doubt the defendant would have been put to his action to recover damages consequent upon the breach of the contract by the plaintiffs. But if they delay suit until the breach occurs on their part, then the law of recoupment applies to avoid a circuity of actions. And we are unable to perceive how the assignee stands in any better position than the plaintiffs. The fact that the subscription paper was assigned before due, can make no difference. It is not negotiable. It contains upon its face full and perfect notice of the consideration, and of ’all the equities between the parties. The material and substantial equity was based upon the building of the mill according to the terms of the contract. That was disclosed in the very terms of the subscription, No one could fail to perceive it. The equitable obligation to pay was based upon the corresponding obligation on the part of the plaintiffs to build; and, although they may have had a legal right to demand and enforce the payment before the expiration of the term for the complete performance on their part, yet if they did not avail themselves of such right until by their failure they had subjected themselves to damages, the law- will not turn the defendant over to his action for such damages, but will permit him to recoup so much as may be requisite to balance the claim of the plaintiffs, if they shall equal such sum.

Now the equities between the parties were thoroughly disclosed by the terms of the subscription, and no transfer or assignment could separate those equities from the terms of the contract, or extinguish them, and whoever took the subscription, took it subject to all the equities necessarily connected with it and inseparable from it. Young might have sued in July, 1852, but he would have sued in the right and in the names of the plaintiffs, and could have recovered just what they were entitled to recover and no more. The paper informed him of the consideration on which it was based, and of the obligation of his assignors to complete the contract. He must have been aware that in case they failed to perform, that consideration would be impaired. He doubtlessly relied upon their ability and good faith to perform their contract, and delayed suit until after the time of performance had elapsed. As he took the chose in action subject to all its equities, it was not in his power to extinguish them, however he might have enforced a legal right. By delaying suit he took the same risk that the plaintiffs would have taken. Although in July, 1852, he might have had a cause of action, and although the after conduct of Hemmenway and Daniels could not defeat it, yet it should be remembered that the proposition of the defendant was not offered to defeat the plaintiffs’ cause of action, but to affect the amount of damages which they ought to recover. The law of recoupment is peculiar and grows out of the same transaction between the parties; is confined to the particular transaction and its incidents. A set-off does not defeat the plaintiffs’ cause of action, but the law permits a distinct cause of action against the plaintiff, in the defendant, to be interposed, affecting in whole or in part the amount of. damages. Recoupment differs from set-off in that, in regard to the former, both the cause of action in the plaintiff, and the right to recoup in the defendant, grow out of the same subject matter and are correlative. Barbour’s Law of Set- Off. 26-28, 8 Hill, 171, and the numerous cases there cited. The right of the defendant to recoup in case the plaintiffs should fail to perform their contract, and should sue him on his subscription, was the law of the transaction from its inception. It existed at the making of the contract, and at the time of its assignment, and the assignee had notice of that equitable right, and that it would become available to the defendant the moment the plaintiffs should commit a breach, and Young took it subject to such equity; and though he might probably have defeated that equity, after the extension, by bringing suit before breach, yet he could not extinguish it. But having delayed the suit until the breach had occurred on the part of the plaintiffs, and the right of recoupment had passed from an inchoate into an operative or vital existence, he cannot now divest his subscription from the rights and equities which originally attached to it, ripened and matured as they are by his own delay.

It is unnecessary to inquire whether or not the assignment and notice were sufficient to bar a set-off or other defence of which the assignee had no notice, because the defence here set up was subject to express notice by the terms of the subscription itself.

We are of the opinion, therefore, that the court below erred in excluding the evidence of a breach of contract on the part of the plaintiffs to build the mill; and we are of the opinion that the defendant was entitled to prove damages for such breach by way of recoupment, to the amount of the plaintiffs’ claim, provided such damages amounted to so much.

There is another fatal error disclosed by the record. The amount claimed to be due in the declaration and bill of particulars, is forty dollars. That was the amount claimed on trial, and only that amount, as appears by the admissions of the parties in the bill of exceptions. The verdict and judgment are for forty-five dollars and there is no remittitur. But we have examined the other, and what we conceived to be the material error, as affecting the substantial rights of the parties; and the determination of this point renders it unnecessary to examine the other questions raised and discussed.

Judgment of the court below is reversed, and the cause remanded for further proceedings according to law.